Tag Archives | external analysis

The Butterfly Effect: Planning with External Analysis

planning with external analysisEvery decision you make as a financial leader affects your business. Looking back on 2016 to now, a lot of events happened and changed the course of business. Often, there are events occurring in the world that either directly or indirectly impact your company. As a financial leader, it’s up to you to decide how to change your business, or if you should keep it the same. But you need to start planning with external analysis.

How External Factors Destroy a Business

Worst-case scenario, a company will collapse due to an event that occurs externally. Here are a few examples of why external factors might actually destroy your business:

Your Company Can’t Keep Up

It’s all about infrastructure. How does your company stay in the game? If you think about it, the core of the company requires a strong group of individuals to keep the company together. Without a strong team, the company will crumble. Analyze your internal situation as well as your external situation: be aware of bitterness, fatigue, and boredom within your staff.

Competitors Fix the Problem Before You Do

“When the going gets tough, the tough gets going.” If we really think about this phrase, it’s true.”The going gets tough” means the situations around you are getting increasingly more difficult. “The tough get going” means that the strongest people work through the problem as fast as possible. If your competitors can solve the problem before you can, then your company becomes irrelevant.

Customers Adapt to the Change

Like we discussed in last week’s blog, the number one reason for startups failing is creating a product that customers don’t need. This can also be applied to businesses that already exist. If a customer doesn’t need a product, they won’t buy it. For example, the hard drive market shrank rapidly after the creation of the cloud. The cloud solved the issue of limited storage. Since then, customers adapted to the change and the hard drive market continues to shrink. Now, it’s up to the hard drive companies to make their change in order to gain new or keep current customers.

Not used to change? Planning with External Analysis helps anticipate obstacles before they affect your business. Download now!

Planning Strategically

As you can see, it takes a lot of adaptation. Over the past year or so, we’ve been getting a lot of traffic from the middle east. Everyone at The Strategic CFO wondered, “Why is this happening?” We caught up on the news and realized that oil prices collapsed.

As a result, the people in the middle east have a renewed interest in all things financial because they wanted to take initiative and start their own companies. To adapt to this change, we shifted our focus and paid more attention to them in our blog and communication.

You, too, can adapt to change. It’s a matter of staying alert, and responding to a pattern. In this case, we took note of our target demographic, and shifted to cater to them.

planning with external analysis

Porter’s 5 Forces

Porter’s 5 forces was created by Harvard Business School Professor, Michael Porter. The model exhibits 5 forces of competition within an industry, affected by multiple aspects of the industry and the environment. The 4 aspects that affect competition include the bargaining power of buyers, the bargaining power of suppliers, the threat of new entrants, and the threat of substitute products.

Analysis of Porter’s 5 Forces

If you think about it, all four of those aspects affect the competition equally, and are affected by spontaneous events. Bargaining power of buyers means that the consumers create pressure for a business to change its product and overall model.

Supplier power refers to the amount of influence the supplier has over a business’s decisions. An example of supplier power is oil and gas pricing. Due to the events that happen in the oil reserves, the prices fluctuate.

Threat of new entrants is the threat that new competitors present in any given industry. In a profitable industry, competition will be saturated. One of our interns told us about an ice cream owner the other day, and he said he and his partner were going to open their shop in Los Angeles. Unfortunately, they couldn’t enter the market because of the competition. As a result, he moved to Houston, posing as a threat to the Houston ice cream market. His product is common with a unique twist, but he entered a less-saturated market.

Finally, the threat of substitutes is the threat of a new product replacing an existing industry’s product. Let’s use an airline as an example. If a new airline provided a better price and better experience, consumers would most likely choose that airline.

Dealing with competition is always tough. Download this External Analysis to beat your competition to the punch!

planning with external analysis

Planning With External Analysis

SWOT analysis considers Strengths, Weaknesses, Opportunities, and Threats. Opportunities and threats are the focus for external factors. These environmental changes are most likely variable, unpredictable, and out of your control.

Environmental changes are similar to “the butterfly effect” – the concept that small changes have large effects. What happens across the world may have a large impact on your company. Not all change is negative – it is possible that what happens halfway across the world might increase your revenues in some way. In that case, you’ll still have to prepare… even if it’s not for the worst.

“Plug In” as a financial leader

As a financial leader, you have to be plugged in. News isn’t always for entertainment! In a way, it’s an indication of what your next move is. When planning with external analysis, consider more than what is happening today. Consider what might happen 3-6 months in advance, based on what is happening and has been happening lately.

Conclusion

Some say that the flap of a butterfly’s wings control the tides on the other side of the world. This concept, although somewhat overstated, is a great metaphor for environmental changes. What happens in Saudi Arabia may not affect us now, but maybe it might 5-6 months from now. The best part of adapting: always preparing for the worst.

Prepare for the best… and the worst. Download the External Analysis to gear up your business for change.

planning with external analysis

Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

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How the Presidential Election Affects Your Business 

“Donald Trump is a philosophically unmoored political opportunist who would trash the broad conservative ideological consensus within the GOP…”

“Hillary Clinton should be in jail because she is crooked, and our nation will suffer from her corruption…”

It’s election season and the Presidential race is a hot topic. Some might say that this election is one of the most memorable elections in history. However, both the Republican and Democratic candidates have gained somewhat of an infamous reputation… and both candidates have a hand in why the presidential election affects your business.

How will our country fare in such a controversial time? More specifically, what will happen to our economy, our businesses?

Animosity in the Workplace

Presidential election season often puts people in the mood for a good debate. When Donald Trump and Hillary Clinton were announced to be the Republican and Democratic Candidates,  things really got interesting.

Animosity between followers of the two parties have clashed like never before. Stealing signs, protesting, creating hate-filled hashtags, and more. Over the past several months, we’ve also seen the presidential election create a financial dent in companies in various capacities.

Can political talk within the workplace cost you your career?

“So… who are you voting for?” This is the question that sparks many an argument.

Long gone it seems is the notion to not talk about religion or politics in the workplace. Tensions are high, and it’s becoming harder to focus at work with the end in sight. Many businesses across the United States are experiencing HR conflicts due to the election – one example of how the presidential election affects your business.

For example, Sarah, an editor of a cooking magazine, decided to hang a “Vote for Hillary!” poster outside of her door. As a result, she was placed on disciplinary probation and was sent home.

Sarah is not alone in the matter. In a recent article, the NY Times reported about how bringing political issues into the workplace is costing jobs. High employee turnover during election season is causing more instability in addition to the uncertainty caused by the elections.

Freedom of speech?

While it may seem like employee discrimination, a private company can act freely in their hiring and firing decisions. Particularly businesses in Texas (a right to hire/right to fire state), employees are not necessarily free to express any opinion and keep their job safe. The only safety net is in keeping your mouth shut.

This issue can only be mitigated by state employee protections. The problem is that so few states protect employees from discrimination for political speech or opinion (only California, New York, and Washington D.C. protect an employee specifically from political activity or affiliation). Private employers make up about 85% of the workforce, and offer little to no protection from being fired due to political views.

Unless your company is all about letting the people freely speak, try to keep the political discussion to a minimum. Instead, create a safe environment a healthy dialogue about how either candidate will impact the company with new policies, guidelines, laws, economic fluctuations, stock market increases/decreases, and business confidence. Use an external analysis as a guideline to create an awareness of potential changes expected as well as a plan to react to said changes.

Other issues within the workplace

I’ve never seen a customer ask an employee about his or her political views, let alone reject their business because of it. The same goes for the business, and their “right to refuse service.” With the issues arising between people, and not just the employees, it seems harder to make a sale.

For example, let’s say you needed to buy a shovel. You make it to the local hardware store, but there’s a “Vote for Trump” sign in the window. Would you give them business? I bet you would if you were pro-Trump. But what if you weren’t?

This isn’t assuming that customers are discriminatory (for the most part). The idea of “voting with your dollars” has never been more in evidence. Consumer spending is less optimistic than before, but like most downturns, there are indicators for a stronger economy within the next six months.

Presidential Election Affects Your Business

The Washington Post recently quoted the chief economist at the National Federation of Independent Business, Bill Dunkelberg: “Uncertainty is high, expectations for better business conditions are low, and future business investments look weak… Our data indicates that there is little hope for a surge in the small business sector anytime soon.”

Check out a blog we wrote this summer about how uncertainty surrounds events like the elections.

Market & Financial Impact

Money Magazine recently published quotes from Mark Cuban and Marc Faber saying, “Stocks will plunge if Donald Trump is elected President. And the bond market could capsize if Trump goes ahead with plans to renegotiate the national debt. Yeah, but if Hillary Clinton wins the White House, she’ll cripple the economy by hiking taxes by $1 trillion.”

There are good and bad consequences to either candidate being elected. As you are evaluating who to vote for or preparing for the impending announcement of our next President, start by ranking the importance and level of impact a particular stance has on your company.
Look at stock markets, debt, foreign policy, immigration, taxes, etc.

Bottom line: vote.

Want to know how to make decisions easier for your company? Download our External Analysis whitepaper to take control of your business during this unpredictable time!

Conducting an External Analysis

Regardless of the animosity and drastic differences of the two parties, we have to remember that either way, someone is going to change the economy. As a result of the presidential election alone, the economy has experienced a slight downturn. Imagine how the selection of a new president will change the future of your business.

According to Wall Street Journal, certain businesses are holding off on million-dollar construction projects until after November 2016. Compared to the previous year, predictions were much more optimistic. New tax regulations, health codes, and other economic policies are examples of external forces directly associated with the presidential election.

The Future with Clinton

When we make projections for a company, we look at the previous years’ financials. In this case, we’ll look at Hillary Clinton’s previous actions to predict the future of our country… with her role as the secretary of state. Clinton was involved with three scandals – emails, Benghazi, and the Clinton Fund.  Will American citizens look harshly on this?

From an economic standpoint, Clinton plans to cut taxes for the middle-class, raise the minimum wage, and other actions related to equality and creating jobs. There is a cost associated with these plans and you must evaluate how your business will be affected.

The Future with Trump

What do Donald Trump’s previous actions say about him?  He has been involved with multiple scandals related to racism, sexism, and violence. How will this affect his ability to lead our country?

From an economic perspective, Trump wants to regulate tax codes in order to grow manufacturing within the United States. His controversial idea to build a wall between the US and Mexico will almost certainly impact trade with our neighbor to the south.  How will these measures affect your company?

Conclusion

Rather than spending time debating your co-workers over the merits of this candidate or that one, really dig into what each candidate’s plans will mean for your company. Take the time to vote.  Don’t take your eye off the ball because of November 8th,  but instead look ahead for what’s to come on November 9th.

presidential election affects your business

Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

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